Shipping lender Standard Chartered has revealed it has completed its first commodities derivatives deal with pricing linked to environmental, social and governance performance.
The Singapore and London-based lender said the hedge transaction was carried out with trading giant Trafigura.
The deal involved introducing sustainability-linked key performance indicators (KPIs) designed to reduce greenhouse emissions from the sourcing of base metals.
Trafigura can earn a discount — or pay a premium — on its hedging rate based on fulfilling the pre-agreed targets, which are independently monitored.
The move follows the bank finally signing up in April to the Poseidon Principles green lending code, meaning more than 50% of global shipping loans are now included.
Principled decision
The principles were launched in June 2019 in a bid to help the sector reduce carbon emissions by aligning banking portfolios to the International Maritime Organization's targets.
The signatories together hold loans worth more than $185bn.
Trafigura Asia-Pacific chief executive Chin Hwee Tan said: "We are committed to embed sustainability in our day-to-day operations in a consistent and coherent way. A key pillar of our responsible business practices involves minimising adverse impacts on the natural environment."
Getting capital where it is needed
Standard Chartered's global head of financial markets sales, Sharad Desai, said the bank is committed to getting capital to where it is needed to help clients achieve their sustainability goals.
"ESG-linked derivatives are among a number of solutions that we offer them," Desai added.
Last month, Trafigura itself claimed a new record with a $203.5m sustainability-linked finance deal in the US.
